FIN 3716 – Flashcards
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Which one of the following terms is defined as the management of a firm's long-term investments?
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capital budgeting
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A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a:
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Limited partner
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Which type of business organization has all the respective rights and privileges of a legal person?
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Corporation
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Which one of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers?
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agency problem
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Which one of the following best states the primary goal of financial management?
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maximize the current value per share
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Which one of the following is a primary market transaction?
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sale of a new share of stock to an individual investor
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Interest earned on both the initial principal and the interest reinvested from prior periods is called:
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compound interest
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The process of determining the present value of future cash flows in order to know their worth today is called which one of the following?
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discounted cash flow valuation
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Which one of the following terms is used to describe a loan that calls for periodic interest payments and a lump sum principal payment?
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interest-only loan
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Which one of the following statements correctly states a relationship?
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Time and present value are inversely related, all else held constant.
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The specified date on which the principal amount of a bond is payable is referred to as which one of the following?
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Maturity
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A bond that is payable to whomever has physical possession of the bond is said to be in
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bearer form
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The Leeward Company just issued 15-year, 8 percent, unsecured bonds at par. These bonds fit the definition of which one of the following terms?
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Debenture
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A bond that can be paid off early at the issuer's discretion is referred to as being which one of the following?
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callable
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The taxability risk premium compensates bond holders for which one of the following?
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a bond's unfavorable tax status
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A bond has a market price that exceeds its face value. Which of the following features currently apply to this bond?
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premium price and yield-to-maturity that is less than the coupon rate
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Which of the following increase the price sensitivity of a bond to changes in interest rates?
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Increase in time to maturity and decrease in coupon rate
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Today, June 15, you want to buy a bond with a quoted price of 98.64. The bond pays interest on January 1 and July 1. Which one of the following prices represents your total cost of purchasing this bond today?
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dirty price
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What is the model called that determines the present value of a stock based on its next annual dividend, the dividend growth rate, and the applicable discount rate?
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dividend growth
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Which one of following is the rate at which a stock's price is expected to appreciate?
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capital gains yield
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The person on the floor of the NYSE who executes buy and sell orders on behalf of customers is called a(n):
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commission broker
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An agent who arranges a transaction between a buyer and a seller of equity securities is called a:
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broker
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An ECN is best described as:
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a website that allows individual investors to trade directly with one another
